ACCC Grocery Price Inquiry report released

Posted by Daniel Palmer on 5th August 2008

The Rudd Government today released its preliminary action plan in response to the Report of the ACCC inquiry into ‘the competitiveness of retail prices for standard groceries’.

The Report reveals there is real reform to be had in Australia’s grocery sector, according to the Government.

Despite the Report establishing that “grocery retailing is workably competitive” it also highlighted a number of factors that currently limit the level of competition including “the complexities of planning applications…[which] provide the opportunity for Coles and Woolworths to ‘game’ the planning system to delay or prevent potential competitors entering local areas.”

According to the Report the biggest impediments to improved competition include:

1. The high barriers to entry for large supermarkets,
2. A lack of incentives for the major supermarkets to compete strongly on price, and
3. The limited price competition from independent retailers.

The Government’s ‘preliminary action plan’ in response to the ACCC’s recommendations covers four specific areas: zoning and planning laws; unit pricing; the Horticulture Code of Conduct and creeping acquisitions.

As such the first steps the Government intends to make include:

* Refer the anti-competitive impacts of state and local zoning and planning laws to the Council of Australian Governments (COAG)

* Consider the best way to introduce a mandatory nationally-consistent unit pricing regime. Issues such as the product range that’s captured and store size will need to be worked through in consultation with industry to ensure compliance costs are kept to a minimum

* The Minister for Agriculture will work together with the horticultural industry through the Horticulture Code Committee to carefully consider the ACCC’s 13 recommendations to enhance the operation of the Horticulture Code of Conduct (which regulates trade in horticulture produce between growers and traders and provides dispute resolution procedures)

* The implementation of a ‘creeping acquisition’ law following the release of a discussion paper by the end of August

In a statement the Rudd Government proclaimed they were “committed to encouraging new entrants to the market” following the ACCC’s highlighting of the “positive impact” ALDI has had on grocery price competition.

The issue of restrictive planning laws is also likely to lead to future changes to legislation, with the Government reporting approval of the ACCC’s plan to review more cases so that restrictive provisions in leases between supermarkets and shopping centres are prohibited under Part IV of the Trade Practices Act 1974 (the Act).

“I believe that our action plan, combined with the broader reforms that are already in train to further strengthen competition policy, such as the amendments to the misuse of market power provision and the criminalisation of serious cartel conduct, will ensure that the grocery market remains competitive,” the Assistant Treasurer, Chris Bowen, said.

Finally, the Government will also set up a grocery price monitoring website, similar to the fuelwatch website set up earlier in the year. The GROCERYchoice website will be active from tomorrow Wednesday 6th August 2008. The website has been criticised by the federal opposition, as they believe it will not place downward pressure on prices. The ability to monitor prices fairly has also been questioned but Mr Bowen claims the system will be fair and reasonable. “The ACCC has conducted a substantial amount of work to ensure only “like for like” items are included in the website,” he said.

“The introduction of unit pricing combined with GROCERYchoice will empower consumers to find the best deals at the supermarket,” Mr Bowen added.

The ACCC report can be found at: www.accc.gov.au/content/index.phtml/itemId/838251/fromItemId/3737